A supply and demand model of co-worker, employer and customer discrimination

Abstract

When racial wage differentials reflect customer, co-worker and employer discrimination, how can these sources of discrimination be theoretically and empirically distinguished? We develop a wage model fashioned around professional basketball that includes customer, employer and co-worker discrimination when there is racial integration. We find that the model is capable of: (1) predicting unexpected effects of the various types of discrimination on wages; (2) the three types of discrimination will interact nonlinearly; and (3) compensation attributable to co-worker prejudice is endogenous. Using data from the National Basketball Association, we find evidence consistent with co-worker discrimination by white players and customer discrimination by nonwhite fans.